Consolidating your federal education loans can reduce your payments, but it may also result in the loss of some benefits
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The Direct Consolidation Loan allows you to consolidate multiple federal education loans into one loan at no cost to you. You will confirm the loans you want to consolidate and agree to repay the new Direct Consolidation Loan by completing the free Federal Direct Consolidation Loan Application and Promissory Note. When the consolidation is finished, you will have a single monthly payment on the new Direct Consolidation Loan rather than multiple monthly payments on the consolidated loans.
Should I consolidate my loans?
The answer is dependent on your specific circumstances.
If you currently have federal student loans with multiple loan servicers, consolidation can greatly simplify loan repayment by providing you with a single loan with only one monthly bill.
Consolidation can lower your monthly payment by allowing you to repay your loans over a longer period (up to 30 years).
Consolidating loans other than Direct Loans may provide you with additional income-driven repayment plan options and Public Service Loan Forgiveness (PSLF). (Direct Loans are made available through the William D. Ford Federal Direct Loan Program.)
You will be able to convert any variable-rate loans you have to fixed-rate loans.
Because consolidation usually extends the time it takes to repay your loans, you will most likely make more payments and pay more in interest than if you did not consolidate.
When you consolidate your loans, any outstanding interest on the loans you consolidate becomes part of the original principal balance on your consolidation loan, which means interest may accrue on a higher principal balance than if you hadn't consolidated.
Consolidation may also result in the loss of certain borrower benefits associated with your current loans, such as interest rate discounts, principal rebates, or loan cancellation benefits.
If you are currently paying your current loans through an income-driven repayment plan, consolidating those loans will result in you losing credit for any payments made toward income-driven repayment plan forgiveness.
If consolidation would result in the loss of benefits associated with some of your current loans, and you are actively working to earn those benefits, those loans should not be included in your new Direct Consolidation Loan. You are not required to consolidate all of your eligible loans when applying for a Direct Consolidation Loan.
For example, if you have Federal Perkins Loans and work in an occupation that qualifies you for Perkins Loan cancellation benefits, consolidating your Perkins Loans may be a bad idea. If you leave them out, the benefits of your Perkins Loans will be preserved.
You might want to think about deferment or forbearance as options for short-term payment relief or think about switching to an income-driven repayment plan for longer-term payment relief if you want to lower your monthly payment amount but are worried about the impact of loan consolidation.
Your loans cannot be removed once they have been combined into a Direct Consolidation Loan. Consolidated loans have been paid off and are no longer in existence.
What types of loans can be consolidated?
The following federal education loans can sign up for consolidation:
Unsubsidized and Nonsubsidized Federal Stafford Loans
PLUS loans from the Federal Family Education Loan (FFEL) Program
Subsidized Federal Stafford Loans
Supplemental Loans for Students
Federal Perkins Loans
Nursing Student Loans
Nurse Faculty Loans
Health Education Assistance Loans
Direct PLUS Loans
FFEL Consolidation Loans and Direct Consolidation Loans (only under certain conditions)
Federal Insured Student Loans
Guaranteed Student Loans
Health Professions Student Loans
Loans for Disadvantaged Students
Direct Subsidized Loans
Direct Unsubsidized Loans
National Direct Student Loans
National Defense Student Loans
Parent Loans for Undergraduate Students
Auxiliary Loans to Assist Students
Private student loans are not qualified for consolidation, but the total amount of your education loan debt—including any private education loans—determines how long you have to repay your Direct Consolidation Loan in some repayment options.
PLUS DIRECT Loans received by parents to pay for the education of a dependent student cannot be consolidated with federal student loans obtained by the student.
When will I be able to consolidate my Loans?
Consolidation is generally available after you finish school, leave school, or drop below half-time enlistment.
What are the prerequisites for loan consolidation?
Some of the requirements for receiving a Direct Consolidation Loan are as follows:
Consolidated loans must be in repayment or in the grace period.
In general, you cannot centralize an existing consolidation loan unless you also consolidate another eligible loan.
Under certain conditions, you may reconsolidate an existing FFEL Consolidation Loan without including any additional loans.
If you have a loan that has fallen into default, you must either make satisfactory repayment arrangements for it before consolidating it or agree to repay your new Direct Consolidation Loan under one of the following repayment plans: Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), or Income-Contingent Repayment (ICR).
If you want to consolidate a deferred loan that is being gathered through wage garnishment or by court order after a judgment was obtained against you, you cannot do so until the wage garnishment order is lifted or the judgment is vacated.
delinquent or defaulted FFEL Consolidation Loan and repay your new Direct Consolidation Loan using an income-driven repayment plan;
FFEL Consolidation Loan to be eligible for the PSLF Program; or
You can use the no accrual of interest benefit for active duty service members on the portion of a Direct Consolidation Loan that repaid a Direct Loan Program or FFEL Program loan first disbursed on or after Oct. 1, 2008.
What is the rate of interest on a consolidation loan?
A Direct Consolidation Loan has an appropriate financing cost for the credit's existence. The appropriate rate is the weighted average of the financing costs on the advances being secured, rounded up to the nearest one-eighth of one percent. A Direct Consolidation Loan has no maximum financing cost.
When do I start reimbursement?
The repayment of a Direct Consolidation Loan will begin approximately 60 days after the credit is disbursed (paid out). When the first installment is due, your creditor will notify you.
You have the option of demonstrating on your Direct Consolidation Loan application that you believe the servicer handling your application should postpone the solidification of your credits until closer to the beauty time frame end date. If you choose this option, you will not have to begin making payments on your new Direct Consolidation Loan until you reach the end of the grace period on your existing advances.
Are there various repayment options?
Borrowers have various necessities, so there are many reimbursement plans — including pay-driven reimbursement plans, which base your regularly scheduled installment sum on your pay and family size. You'll choose a reimbursement plan when you apply for a Direct Consolidation Loan. Find out about reimbursement plans.
How do I go about applying for a Direct Consolidation Loan?
Make an application for a Direct Consolidation Loan. You can fill out and complete the form online, or you can download and print a paper application to mail in.
The consolidation servicer you choose will consolidate your eligible loans after you submit your application electronically or by mailing a paper application. If you have any questions about your consolidation application, you should contact the consolidation servicer.
You must keep paying back the loans you want to consolidate until your consolidation servicer notifies you that they have been settled by your new Direct Consolidation Loan unless they are in a deferment, forbearance, or grace period.
Who should I contact if I have any questions about loan consolidation?
This is determined by your position in the consolidation process.
Contact the Federal Student Aid Information Center (FSAIC) at 1-800-433-3243 if you have any questions about consolidating your loans before applying for a Direct Consolidation Loan.
Fill out the feedback form and submit it, or call FSAIC at 1-800-433-3243 if you need technical support while filling out the Federal Direct Consolidation Loan Application and Promissory Note online while logged in.
Contact the servicer for your new Direct Consolidation Loan if you have questions after submitting your Federal Direct Consolidation Loan Application and Promissory Note. If you submitted your application online, the contact information for your consolidation servicer was provided at the end of the process. If you mailed a paper application, the contact information for your consolidation servicer was readily accessible when you installed or printed the application form.